Correlation Between Trade Desk and Fair Isaac

Can any of the company-specific risk be diversified away by investing in both Trade Desk and Fair Isaac at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Trade Desk and Fair Isaac into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between The Trade Desk and Fair Isaac Corp, you can compare the effects of market volatilities on Trade Desk and Fair Isaac and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Trade Desk with a short position of Fair Isaac. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trade Desk and Fair Isaac.

Diversification Opportunities for Trade Desk and Fair Isaac

0.83

Correlation Coefficient

Trade Desk  Fair Isaac

Very poor diversification

The 3 months correlation between Trade and Fair is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding The Trade Desk and Fair Isaac Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fair Isaac Corp and Trade Desk is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on The Trade Desk are associated (or correlated) with Fair Isaac. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fair Isaac Corp has no effect on the direction of Trade Desk i.e., Trade Desk and Fair Isaac go up and down completely randomly.

Pair Corralation between Trade Desk and Fair Isaac

Assuming the 90 days trading horizon The Trade Desk is expected to generate 1.45 times more return on investment than Fair Isaac. However, Trade Desk is 1.45 times more volatile than Fair Isaac Corp. It trades about -0.06 of its potential returns per unit of risk. Fair Isaac Corp is currently generating about -0.32 per unit of risk. If you would invest  12,426  in The Trade Desk on September 24, 2024 and sell it today you would lose (506.00) from holding The Trade Desk or give up 4.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

The Trade Desk  vs.  Fair Isaac Corp

Trade Desk

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in The Trade Desk are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Trade Desk unveiled solid returns over the last few months and may actually be approaching a breakup point.

Fair Isaac Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fair Isaac Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Fair Isaac unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Trade Desk and Fair Isaac

The main advantage of trading using opposite Trade Desk and Fair Isaac positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Trade Desk position performs unexpectedly, Fair Isaac can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Fair Isaac will offset losses from the drop in Fair Isaac's long position.

The idea behind The Trade Desk and Fair Isaac Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.